TTC - Earnings call transcript Q1 2020

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Operator

Good day ladies and gentlemen and welcome to The Toro Company's First Quarter Earnings Conference Call. My name is Sara and I will be your coordinator for today. At this time, all participants are in a listen-only mode.

We will be facilitating a question-and-answer session towards the end of today’s conference. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

to conference, presentation of Nicholas for Toro like host to Investor now The today's for Rhoads, Company. would turn over the your Relations I Managing Director Mr. proceed Please Rhoads.

Nicholas Rhoads

good and you Thank morning.

be morning release earnings Wire copy Investor website our was section this thetorocompany.com. found Our by the in issued and Business a of corporate Information can

On Officer; Financial Vice Peterson, and Chief and Officer. today President, Rick Chairman Olson, are call Renee our and Executive Chief Treasurer,

We begin forward-looking policy. our with customary statement

business make will financial forward-looking we and call, our future operating regarding this results. During and statements

You uncertainties all aware risks, are of the in difficulties, inherent and statements. making predictive

release SEC differ we update have a the cause of well predictions. from earnings our Our that actual do not forward-looking our as our as that materially filings, detail may note to factors risk our duty those some to statements. results in important Please

In non-GAAP adjusted or be adjusted to website. reference metrics measures addition, financial of on we financial and measures reported measures this during historical will earnings release Reconciliations metrics in our and financial non-GAAP metrics. certain our call, GAAP found and can

views ongoing may and company comparisons understand useful measures its these performance and be believes business. the to past metrics results of and in of performing management present The how operating the meaningful operations

conjunction earnings in and the Such or presented as in this a should GAAP considered as and metrics adjusted substitute financial in and our an non-GAAP be with measures not call. metrics considered be for, financial measures should superior to, release alternative to,

call turn With that, I will over to the Rick. now

Rick Olson

our in empowering sales key growth, ahead. The our and and was off strategic a on start season encouraged Fiscal to margin we're about is XXXX Thanks focus profitable people the momentum productivity, priorities of morning. QX. to and good and team's positive

strategic We acquisition organic complement to also our growth. a announced

is smaller over $X.XX, up sales earnings We we year dedicated up XX%. the financial sales a and at we thanks the $XXX record share efforts the diluted million, Toro's XX% delivered achieved of although earnings. of generated typically quarter, net employees, to of adjusted first quarter net Looking our results, and prior per

Professional of the the equipment, delivery residential snow addition Results primarily to -- price Machine the on the segment and in and Mowers driven continued in the by for were the of Zero-Turn Works, segment BOSS realization, ice residential management and demand by Supply net Charles Tractor riding Company. initial

and the Products and happy turf, to During a acquisition of on Venture that equipment. the Venture is snow provider brand announced report under we we management first quarter, which Products respected of ice the Monday. manufactures closed Ventrac and landscape, I'm

for and versatility, valued their capabilities. attachments, are multi-season hillside machines Ventrac

a the customer similar commitments team Our people innovation, to and to share value-based Ventrac formally want I welcome Company. Toro strong The culture to with service. quality,

quarter. for Turning the to our operating performance

Our Works from and net BOSS and and Professional contributions reflecting businesses. grounds irrigation sales incremental golf Machine positive Charles segment acquisition the contributions grew from XX% the

Charles revenue Machine Witch, Works Subsite, such quarter. of Trencor, through the incremental iconic strong for family HammerHead, Ditch as American Radius its generated businesses and brands with Auger,

recently new solid Works Witch Drill expectations on our Nearly launched to the SKXXXX Toro Company, deliver we traction steer joined in after Bluelight track including and integration skid Ditch drove team with the The the is Directional Cured-In-Place target. Machine JTXX demand Charles gained mini synergy are our exceeding and year retail We the system LED lining products one the marketplace. and

management winter truck due of plow early models. undercarriage resulted quarter to equipment. demand and snowfall from and BOSS new healthy turned in ice mounts for This key sales regions in for snow and another good

one-person operation. retail strong the continued Snowrator, into saw job multi-person a which also treating demand the sidewalks for turns of and We plowing a

in from benefited and solid golf Europe golf Asia. demand worldwide equipment and Our business grounds

fuel costs. our high. appreciate noise, Customers new was its maintenance, Greensmaster reduction mower in greens in all-electric and Interest riding eTriFlex

the our U.S. in Additionally, we international golf markets. saw increased and activity deferred across projects in previously

partially business in the demand and results the This ag Eastern offers United enhanced clog Our was Aqua-Traxx introduction quarter irrigation States of product Mexico. technology. for the increased to by precision tape that driven resistance positive due Azul, new irrigation posted the

in weather in was favorable quarter and key early helped residential driven used commercial Irritrol that business growth products domestic for Irrigation applications. by in the drive regions demand

to Turning shipments to largely we our segment, sales Supply Riding achieved by over the Mowers net XX% for driven Tractor initial Zero-Turn stores. Residential quarter, growth of

recorded our in pulp-branded DIY also positive from results business We Australia. irrigation

retail our the and for organic quarter, Company with Tractor summary, delivered acquisition of to we another In mass growth. complement addition the channel expanded strong Supply performance our completed the strategic

more call over turn now a of I our to for discussion Renee the detailed will financial results.

Renee Peterson

focus and morning multiyear, maintenance. portfolio Charles use and on our revenue is The season. Company enhance Rick of the customers' seasonal, products you, of Machine good is balanced in infrastructure due to incremental across and installation adds and the productivity Works XG products the of comprised Toro such telecom underground less everyone. as to projects, these Thank a and

operational on and allocate synergy across focus This ongoing including over variety and the company improved should a alternatives, Our of dividends, repurchases. margins share acquisitions, capture yield the to paydown across time. portfolio capital excellence enables debt

demand do our factors growth and control, free to to healthy provide cash the portfolio certain adjust to out of situations changes shifting-weather allows and us lie generate consistent in of While businesses flow. customer long-term

able maintaining to for exception. QX our set mix, of no strategic we while our we quarter, is on changes on initiatives and the product based to smaller demand productivity adjust channel and were growth, ourselves, people. exceed in expectations our though Even focus to QX a was ability

$X.XX fiscal increased XX.X% first XX.X% increase the reported Adjusted $XXX the quarter, quarter quarter compared sales diluted EPS of We last to $X.XX. $X.XX net the EPS million year. to for in of was XXXX. Diluted a from

Works net driven For sales sales quarter, of which XX.X% $XXX professional revenue The added was growth increased segment million. the acquisition, to by $XXX.X Machine first million. the Charles primarily incremental

professional QX Works, Machine of as lower compared XXXX. a Charles were to sales Excluding segment strong

first most partially focus we contractor for as of and ice was professional quarter on and Professional snow During the shipments management, golf our businesses. BOSS to irrigation products, managing increased businesses QX including, across inventory. of million. lower XX.X% $XXX.X field This realized segment and grounds sales XXXX, by we landscape earnings offset

a segment synergy the for up basis Riding in costs point segment reduction reflecting XX% segment Zero-Turn and quarter margin first favorable improvement tariff to up was $XX.X of to XXX year-over-year lower driven Supply. improvement mainly mix, earnings Residential Mowers by in and shipments were driven million, commodity costs. by were to Residential and margins. million, freight largely productivity sales This sales Tractor initiatives, XX.X% $XXX.X net

combination due to anticipate in then In the year. quarter, with good first a operating of to second quarter comparable of and moderate We to second strong half the segment segment margin margin the to factors. fundamentals be translated the quarter

teens. year result, anticipate a be As full we segment in the margins low to residential

results. gross first an was our increase Reported quarter to period. XX.X%, margin of XXX basis year Moving the prior for points the operating over

impacts nonrecurring net basis to XXX margin costs. gross were and points initiatives, and commodity other price lower improvements XX.X%. increases freight realization adjusted productivity Excluding primarily increased items, driven by and increased tariff synergy acquisition-related These and

for Operating to Works support additional basis a of expense, net operating the increase higher XX.X%. by to sales for of for SG&A costs the to retail XX increased to XX.X%. channel. Machine increased the marketing $X.X as -- expense percent million Charles percent of due as sales with earnings, quarter. Charles net fund quarter, points was Machine percent and higher the increased a Adjusted XXX basis addition earnings, Interest increased points due primarily the mass Works the a of as to This increased points acquisition. debt sales XX basis

Machine the was of tax about XX%. expense interest anticipate acquisitions. for we and first debt year, and the tax Works additional was effective The of result $XX effective the full Charles the rate fund reported quarter For rate as Products a adjusted Venture million XX.X% to

For full tax effective XX.X%. to adjusted continue about year, we the of rate an anticipate

from due professional to million. up higher segment. and segment expanded support in Turning up and our Accounts were inventories business channel to $XXX incremental to Machine the inventories of and a channel. in receivable contractor XX.X% mass higher inventories and was mass sales from in introductions million, $XXX.X product new result Charles Works landscape the totaled the inventory a to primarily the year Charles and balances balance as retail Works our retail residential Machine flow. sheet This into Net higher ago, XX.X% cash

our increased $XXX largely Charles payable to XX.X% million, by of Machine acquisition Works. driven Accounts

of We expenditures million. expect and depreciation and amortization million about for fiscal capital $XXX XXXX about of $XX

As I conversion our flow mentioned, in we preparation negative was our key projection for inventory quarter, free while same. built selling cash the remains the for season,

XXXX. to about anticipate be flow fiscal for XXX% We continue conversion free to cash

Delivering high ability infrastructure increases fund multiyear projects, future well the to products and more of demand varying as as levels our to solutions growth. seasons, profitability drives for consistent capital aligned allocate with

to cash debt M&A investment for allows repurchases strategy opportunities allocation return share capital in through disciplined and paydown. growth the of and organic and dividends, Our shareholders

disciplined development in Products We innovation fuels on acquisition. to growth we which our maintaining example we product continue organic to customers a recent broadened as acquisitions. and profitable is our approach focus a of our invest to offering growth through Venture this new and are

call turn now will back Rick. the to I

Rick Olson

Thanks, Renee.

our in performance us quarter, our in new outlook record customer reason Our products XXXX. the optimism first innovative the for to key for response give and markets

about of year, Products full we earnings to $X.X adjusted per $X.XX continue acquisition. billion share of inclusive expect revenue to the Venture of and For the $X.XX diluted

quarter, share diluted earnings $X.XX. second to the expect we per For $X.XX adjusted of

trade challenges policy to that our watchful regulatory and actions a impact have coronavirus. and we weather, performance, could such of always, As factors unfavorable eye the as pose on

Given thinking Toro. to potential the I'd providing a focus effect our moment on current on its like spend on coronavirus,

the and of First on we and are employees foremost, our health safety focused other stakeholders. and

recommended appropriate We precautions taking including are by the those monitoring and government situation agencies.

internal for have In a to we addition, us are prepare groups planning scenarios. helping number that various of

appropriate are disruption. real-time our steps minimize of supply we and terms taking evolving chain, situation the observing in to closely In

Our to team, working flow is a with including suppliers steady maintain China the ground diligently of our components. in those on

XXXX. in from We standpoint, disruptions a material we do currently in modest expect at this revenue From financial effect supply chain impact not a time XXXX. expect a fiscal

We sales affected far. geographies have been coronavirus minimal most by so that from have

reflects full quickly, second these evolving may affect our factors is year and performance. our of guidance situation the While estimate how best our quarter

businesses despite review XXXX. with second the In annual the wettest in U.S., Rotary unveiled All-New At Let's and Central Golf were prospects latest Show X.X% in and up golf, Industry forward. such Out-Front the products Starting Mower going Control the segments. rounds year we turf the record professional record our on number Lynx a Orlando, for for the System. Groundsmaster upcoming as the season, in irrigation recent of played

a unveiled to their for is golf operations. that agronomic a technology Toro from for smart sources products run asset labor, platform equipment concept superintendents. IntelliDash, real-time as other provide managers we Additionally, information, such IntelliDash and health golf course conditions, and management location better connected data to integrates

fully and autonomous introduced a a and machines. Multi technologies also suite sprayer autonomous Greensmaster auto-steer new concept We Reelmaster include of These Solutions. Pro capabilities GeoLink with called

Our drive customers products alleviate productivity are and achieve help and challenges solutions their these can the goals to in labor seeking them future.

encouraging our outlook the to build-out. as continues growth Turning The business. such be with opportunities market strong to XG Underground wireless

Our showing new product directional strong drill as are such introductions early retail demand. JTXX

cable the and right rehab. repair the full have cycle from products We pipe installation, of to life to support and

We'll show products Trencor representation showcase Ditch our and Augers, upcoming the and Subsite. CONEXPO American with trade at Witch, brands from

Rental As American trade and construction the some is strong. you of our specialty rental for the recently business observed show, outlook Orlando during in Association

products. U.S. in of The spending, support projects create fundamentals following approximately which the grow should continued demand each in Industry American Association new construction rental and expects years. equipment XXXX to Rental three ongoing for revenues growth our X%

lot Toro at eDingo show. battery-powered attention orders compact and garnered a The ARA loader good utility the of preseason

launched trencher and skid at excitement remains three smart received mini exhibited the trenching innovative Ditch SKXXXX industry awards high steer. Additionally, IntelliDash for Toro for the also Witch walk-behind ARA TRX recently technology. the

anticipated for TITAN and We're Turf the mowers. by recently These sprayers riding aerators; demand products and Lazer also contractors. zero-turn and landscape excited spreaders, Exmark include for introduced Z Toro

contractors FORCE in year-end. addition with at MULTI to selling for due higher-than-anticipated had the QX is the season inventory by followed last year attachments We of GrandStand multi-seasoned Additionally, field resulting start building use. to a strong wet momentum unusually

field inventory Assuming normalized weather we will our selling demand season. landscape reduce anticipate this more contractor we -- -- retail assuming

expand our partners benefit channel product product and Company, the marketing. to the of from excited Supply positioning all we're placement residential, For Tractor with refreshed will brand

this steel of line XX-volt results turn In power mower we the our a redesigned XX-inch TimeCutter lithium-ion expansion mower These zero trimmer. expect products to the Flex-Force include products, walk addition, innovative new of contribute including a hedge our and deck will riding and year.

strong empowering results your dedication drive deliver year. achieved we include key for first another productivity the We In quarter. expect success summary, our as focus our priorities. to employees and work and channel to on contributions to we partners operational together a growth, in and These people. to your successful appreciate again, the focus we profitable thank excellence, through Once you strategic and

like take your to questions. now We'd

Operator

from Dougherty first Our Instructions] the [Operator Company. question line with Shlisky Mike comes & of

Your line now open. is

Mike Shlisky

everybody. morning Good

Renee Peterson

morning. Good

Rick Olson

morning. Good

Mike Shlisky

Works the any you Machine that from sheet. you Those bit I'd is like quarters elevated balance that the off inventories your next Charles number with are stuff you've the of with quarter give to have a plan on but start here? some us there as ones channel, not own I that sheet of way balance the can are previous in to sense were the there. couple the versus -- in in know a perspective down to whether got a bring a little your dollar quarters. on But

Renee Peterson

Yes.

a as far our partner the inventory introduction just the build then biggest XXXX. that that contractors as the Works bit the as had ahead intent given the is year-over-year had to of new indicated increase well as mass Machine channel landscape of factor some So we Mike from in given little a retail of kind season we Charles situation weather and inventory

look cash level. inventory of conversion our year. that's that about And we in for to flow free throughout the bring estimate XXX% the we As do down year, intend included

we'll see level So driver the through year. coming the as that go down that biggest is inventory we

Mike Shlisky

ask we've are gross margin seen the the years. Okay. to quarter. of a best Great. couple I Those your about some in Also want in of

the some Or cost, rest maybe tailwinds sustainable an year here? have et locked cost you do got You environment you've for those Do that of think there? in some the it the are a items of couple think? the of mentioned of How pricing cetera. like material you uncertain freight, is with

Renee Peterson

realization did our did QX. feel residential. and their about focused margins And We We gross commodities favorable continued Pro net see and on commend in synergies. productivity for heavily more Yes. business more on price really focus the I than the good segment team

we do see for some margin same As gross at look Mike, not improvement the that year, we for the year, expect year-over-year. to but rate

part was residential expect especially just mix the -- QX, also in segment. we of don't favorable So it product a in

Mike Shlisky

Okay. wanted as to Got touch Ventrac well. I it. on

there to kind Monday one-time change for for move definitely think it kind was long-term lot you of I closed any the past needle? it be this just anything? But I guidance year? the you? curious You've just is it And Or was accretive it of said. to is this or small there watch Are a is a too items of deal

Renee Peterson

Yes. I'll start just a little bit about Ventrac.

only million So We're based year on in it's about revenue a $XXX the prior partial to see year. going this year revenue.

So it's EPS from immediately a excluding perspective. standpoint little is items. bit an smaller accretive from It one-time that

So out acquisition we or adjust integration-related costs. would any

the range the within is profitability of The segment. Pro

early additive relatively it. So It's of for about relatively just the just we feel It's year on Toro. good scale to small and be our guidance. it in really the to

Mike Shlisky

QX, I quarter $X can me. higher? one there your basis. you here or already for very be have Do a Okay. just where you QX you but don't ask what on for out want beyond put more a guidance top that first broad you think line billion full for your And maybe to on

Renee Peterson

Charles about we spring it. Yes. is don't have, see will we of part on the the less but but we've I how the we'll depending specific before, feel unfolds. see. good for give it Machine impacted mean, about guidance is that type it as quarter, I revenue of talked mean, weather. by we on We And Works

us that plus well. So real a as is for

Mike Shlisky

Okay. it. Well, congrats hopefully. in Appreciate that, advance Thanks. on

Renee Peterson

you. Thank

Rick Olson

Thank you.

Operator

Thank you.

from comes the Research. of Longbow with Our MacGregor David next line question

Your line open. is now

David MacGregor

for Thanks the everyone. question. morning Good taking Yes.

Rick Olson

Hi, David.

David MacGregor

virus the to just guess disruption. start I on

disruptions release of impact any that there's disruption Is You the for to about with noted you're XXXX, already the to I guess, you thinking guidance channel talk or if it's XQ the nominal. the discussed just can the -- from $X.XX $X.XX might whatever for be in is characterized you the regard there press expected, way impact supply but but? revenue no that

Rick Olson

several elements to can you imagine. There considerations coronavirus Right. as are the

sure then so the and foremost, place demand employees, our as are of at so logical the supply guidance But talked in side forth. side. and keeping we the travel about that it's and First look safety you we making

first the through We mentioned we've suppliers mid-summer good have mid-summer. handful us well next then side, And any plans no suppliers. confidence after for the that supply with we of a that the our moment into And possible working get to kind that's China XX disruptions. for working days in disruptions of key take There with On they're from us. shutdown on period into normal a coronavirus bridge matter. been was are go that that that we example especially

now So period. right we the is key really spring see bridging through the

demand from the have the other but countries very been especially outcome us, in in be up to would exposure standpoint significant again could important the those side, make and the revenue areas. not is a we to that On they affected likely for

is commentary as of thing side I one helps some those out that positive think balance the us on well. about risks the Ventrac

David MacGregor

that. of covering to approaching accounts Right. very I anniversary seems transaction mean been it Works, have Machine Thanks successful. all Charles the for you're by that

where of still the talked was ahead this And is over running curve? do And Or expectations. you're on three a $XX originally forward to You you recollection you're track pulling million become you sense us a as of press number? years. bigger cost just issue where a that million? consequence $XX might in expectations original much million how it and just about be? a Can does My timing of $XX release you're the synergies give are just your you on was about of ahead synergy

Rich Olson

high to do have more. that we three do million see confidence Yes, get $XX $XX number. We will and to that the million was opportunities over years we

optimistic and that our well. we the the more last I mentioned company were lens kind as of as it are at of we there opportunities think we look call opens on the rest that

our have in a taken score area. to that approach We very keeping disciplined

we counting we to about. synergies which will be can realized, the And the as the that's until but certainly but we is previously strategic integration ahead absolutely the well of or track well the terms we schedule $XX took million We're another is on was that side, various is that not we're in on broader those immediately -- businesses. from talked going and And actions a really of of process place being place be exceeding visibility all So element, ahead element in the see that restructuring took that that they confident of on right synergy itself. standpoint with the track. have the

David MacGregor

Right. $XX million was synergies revenue incremental right? our And be of just anticipated that to synergies clear above cost the none

Rich Olson

$XX didn't more million and relative also with at see was cost that revenue we there's the Toro. closely here But about we as team synergies capital specific we working opportunities. work the benefit get to a organization

David MacGregor

to end to it detail little happening this some that is you for me, more what inventory -- Can certainly talking require unpack do it's any Right. granularity I there there was surplus issue it's be exactly going I just some recall quarter. that really kind more and for you just give something something is last have of little bit, was just a contractor why continuing here it the would of as you've about professional again this there this quarter on? issue as a going well some got, And And And guess obsolete Or we're this helpful. and then maybe -- -- there landscape a inventory is little is where quarter? an around us is resolve write-off? by us that

Rich Olson

Yes.

obsolete really backwards, written-off. going -- story no starts year First is at to be It time. really last there's that this has inventory the

professional XX% remember year. If general was in segment up last almost you

in first the quarter. pretty So difficult comp is the

All growing. of actually business. our the professional The are is exception contractor businesses landscape

products year at last excitement strong of was tremendous combination time And spring. there this prospects of new the with the a and

least because not I think -- I wettest in season was a horrendous mentioned So prepared at quickly remarks move it at as retail that second did history. U.S. the weather in year we shipped from product ultimately the as wettest

as really quickly second in had the that all see retail at we second So All the and we to expect quarter in the this the that have through expect is corrected not through just our we year-end. reflected planned. as quarter, and did for the move quarter guidance. across And professional the went first growth you'll business precisely

to we put So inventory this a year. into our planned was adjustment the that

David MacGregor

Okay. much. Thanks very

Operator

you. Thank

comes question from the with next of Our Northcoast Research. Hayes line Tom

open. Your line is now

Tom Hayes

Good morning. Thank you question. for my taking

Rich Olson

Tom. morning. Good

Tom Hayes

wondering initial your more how on locations? the loading Supply, was provide maybe rollout just applied out playing -- I Or on thoughts that thoughts so a detail all little does Rick, the apply to maybe Tractor that's to of does on could your you you -- kind bit far?

Rich Olson

shipped our to And We well. with the Tractor has Yes. more we relationship shipment than at The on with response product and initial on we're our to based a -- Tractor actually Supply where day from expected. stronger in growing The the stores extremely rate is agreed-upon an and is be. standpoint. them. -- the right first what we really with every customer association the we've been initial That's projects Supply expect quarter track going steps

for provides us products, And to in for the strengthens is exactly in the -- bottom for very the is that mass mass So invest marketing it's network. that really business shipments second place important mass it planned. the our residential will in critical brand so of other the the entire And good additional the partners, the still yes, thing take as line all business -- retailers and going plus dealer really quarter. our of bulk

So first -- more a in that's units just did few quarter. true. ship the We we

Tom Hayes

levels. Great. Appreciate the I on earlier guess circling secondly to color. back then And inventory question just Michael's

it's season of month inventory or snow channel your thoughts of just channel a business? the so. the snow on as last levels, been side on Maybe far kind As inventory

Rich Olson

less the snow. -- on inventory. The market we're good Northeast shape generally in in was slower a Yes, because we are of snow little

have a And inventory in the the lot But a start So share our to same shape bit at very that's snow little a snow solid very took at where very, we average, in we the -- events is place on and early season. our the in year. strong the Midwest there. time, strong that's is higher of

So side. good position exceptionally and good the a on from shape field both the on residential we're in inventory side BOSS

Tom Hayes

Appreciate you. the Thank color.

Rick Olson

Thank you.

Operator

you. Thank

next with James. Raymond Our comes Darkatsh from question the of Sam line

Sam Darkatsh

Rick. Renee. How you? Good are Good morning, morning,

Rick Olson

Good morning, Good. Sam.

Renee Peterson

Good morning.

Sam Darkatsh

And they most questions have few of topic. this A product SKUs components? to could mine If sense vertical? speaking, and what overall of of sense asked it where Chinese-based particular been coronavirus we us overweight if percentage any are Give where unfortunate in we the a your would I'm it trying have transpire? generally back mostly answered. to -- margin-wise, issue? would get Or an a see becomes return

Rick Olson

of Yes. wouldn't an exact percentage We have content.

that be things, higher We have of a of commercial say just general the bit terms than of on volume residential exposure here. right be residential part not It products. probably type would have be We us components the it in on be more it there it information. homeowner would of would the But of That's in in front would of products. key side. side that, that commercial the on wouldn't more don't COGS, to be through

Sam Darkatsh

might a the what there what get to XX exact those you included XX as how I utilization you verbiage little like? in of remember in the bit you opposed up plans to envision plans now? critical -- them have you're in days had unpacking are the for in assumptions disruptions. contact more plans very what And do running said post days. vendors then think rates have quickly might that with. look specifically might terms you Can you contingency like their some used mentioned I you where look vendors or don't close And And and area you no terms of with

Rick Olson

we global Sure. chain. we -- place supply across in are And have plans those our

secondary the probably it's about Japan any somewhere Korea, talk little China, true a but whether suppliers that -- I'll same else. South holds core supplying Italy, might be bit or top suppliers So

every there by needs our about on when weeks coming as did. as extend still lunar are flow specifically part it at a what's our New continuous think products have even, So you to Year and actually time. shipping they we looks in they six -- if -- be number if Water the There's of team, it, the of plants, Water

status terms of key And approaching at XXX% the just they in of are our this in suppliers China, point.

XX% within So expect at be to weeks. above they're well XXX% two

plant small that operating. We and in up have China also is a

we that what would I -- the about the material effect period March all way build and not do the to in us. the So be through talked we expect beyond, for

freight place. have products not those plan the see air would boat What challenge We is we're freight at and some we right on we would now expect of that because of premium shipping. is put And some a would to a in carriers. we availability use looking

see shutdowns keep some exercise. significant. short-term months, we in into mind, don't where disruptions expect just we as carriers be fill those gaps. to So tapering that's we're might that that normal into now the -- random one summer will be that in And the got tapering a we've of lines, have of we sorts seasonal plants kind our areas of the we're right We but on working to that our make sure can frequently

our good play shape in we an that from So finished will into mentioned as we're benefit goods. inventory plus standpoint

Sam Darkatsh

figure And then think be? to organic I but sales guidance would range If like if looking doesn't that the of my why might for high-level suggests easy I'm of you're growth single out and trying in landscape it Though last I'm my why question organic high looks getting at wouldn't the and holds, snow near you're single-digit to then math three mid it to just low is the anticipating more be in year any the trying essentially digit? my shape underpinning effects a thereabouts. holds quarters you understand, that is in mentioned kind math question. tractor always, coronavirus supply impact. higher professional but like both inventory conservative, material next and naturally and/or channel resi. good not the I term than repaired sales know in comparisons

to relates understand, So I'm season the expectations? to conservancy it the organic trying sales as why and the extra

Renee Peterson

that early Yes. in I look year. the as just we would still it's forward, say

we greater -- see what projecting and We until season just so guidance. how has normally just unfolds provide And the we isn't would how year growth the

Rick Olson

We'll to we'll better that the be spring By position offer be second of will the of opportunities having much that in the context we're our about, well coronavirus better be maybe and If a other our the the year. a beyond out plays with the guidance position discussion in more some guidance quarter the on point, staying well that. along. year. in talked season of there In we for factors experience

Sam Darkatsh

very you it. Appreciate much. Thank both

Rick Olson

Thank you.

Renee Peterson

Thank you.

Operator

Thank you.

Our next Company. Mondillo Sidoti the comes Joe from with of question line &

line now Your is open.

Joe Mondillo

everyone. morning good Hi

sort of prior Could a to in update related follow-up the what on point of us you weather you year? time how season thinking this last relative at saw about context the weather. you're to that in Just especially question

Rick Olson

Yes.

the my year memory of my was last weather So among association with in springs worst Toro. at least

So was activities the excitement in the season we spring it some -- most the of significant the April. the and well that had into snowfalls some out spring Midwest about pushed the of And of mid-summer. in normal

seeing we point. breaking the has would built warm-up south we've weather year call means plan a pattern is particularly started which know a normal At normal in So into this we're this normal the and spring. the our what this point of what pattern we at that

So that's point. is built we've our plan at this where that what we've -- into and

Joe Mondillo

of maybe today to be it's year? degrees normal in when if -- to good wouldn't than normal it's see could follow-up supposed to considerable be do better last -- the we I normal pretty even XX It's last scenario -- sort pattern, again we a But growth just even so and to in the a weather compared XXs here if Northeast and yesterday. you prior see be in growth And see I'm question normal. to it's it the guess supposed

Rick Olson

a be I out us we April think at see early in decent built We've nominal we if kind excited and opportunity And of a couple it were start we into to coming surprise. turned there's where flows summer to fantastic years a and a better. of the then were this directly do spring level a about spring to off for point.

more is weather this it's So point, but we we've normal what forecast at in back situation. built a to the right for think the

Joe Mondillo

in segment, Okay. there your off the mentioned itself. turn that quarter math are revenues the right sized. stated And of organic and And it a doing you regarding looks inventories if sort now like landscape X% I'm the were professional year-over-year the you correctly

going forward returns? number So one, you think growth

in main rev the number declines, -- organic expansion your two, to Could And what us terms you through even those margin the margins expanded looked organic a bit. margin on once? like quite driving the margins of organic the walk factor it

Renee Peterson

a and piece margin back the were in the expansion, from take I the business we We commodity can Rick could benefit we across at then the and growth. Well our and see productivity to margin synergies. maybe tariff was come focus really from environment if better did revenue look commodity the Well good and it on standpoint. a

And the net but versus price pro biased the more towards the as well realization residential. helped

we rate same probably a improvement but we year-over-year the at to remainder So year of we not improvement benefits continue expect of see the standpoint through do year. go do for continue as expect the see that to margin gross to from Joe,

Rick Olson

that the second year contractor timing the well. largely the to where need to growth would landscape quarter. the But we of LCE second business starts growth quarter first into the spring we -- And expect in that's of happens of the as to regarding our third half that show part and get through the will

Joe Mondillo

equipment BOSS Midwest minimal saw this I I How Okay. the the And snow I year? sales, terms snow But the Midwest. characterize you in person in we guess asked. a Northeast question snowfall the would so in here last is know -- already the know more in but one of up just

looking inventories sort at clarify year, And fiscal back the sort this to of normal. you're characterizing of sort half are of just of

So on a based related in half I the of what channel to effect the saw not anticipating inventories in guess, snowfall back we the minimal you're year? big Northeast

Rick Olson

a strong not. we start we're way Midwest No this snow year. to And perspective season the from a had the very

was below average in -- averaged average in but of probably a probably to with performance starting two extremes. year average out a it so January, on So it tale February an

was is helped be field The November-December created a though that extreme. good way it Northeast in inventory. So retail lot shape the pretty of us through that all from demand exception. a timeframe to a

the kind that year second of not there. So situation. was row a that's case But been in the that for

shipments drive year. last a of So incremental lot it did not

Joe Mondillo

just your you And lastly, great. for I just -- you Renee, know products could repeat were margins? sort what expectations Okay, residential of or

Renee Peterson

in of had I what Tractor Yes, margins QX. we mentioned, would as what be occur the Margins. residential mentioned saw because, QX, will Rick is, did QX we Supply shipments expect the similar in in bulk to

to So would than higher we're growth see in quarter. in the going we residential normally see

in to expect a We from And margins and we so expect lower at would moderate, level. low half standpoint, QX residential the year a full QX second the teens.

Joe Mondillo

a Thanks day, great. lot. Have a everyone. Okay, great

Rick Olson

you. Thank

Renee Peterson

you. Thank

Operator

Thank you.

Baird. comes Wojs question from with W. the of Our Tim next line Robert

Your open. line is now

Tim Wojs

morning. Good everybody. Hey,

Rick Olson

morning. Good

Renee Peterson

morning. Good

Tim Wojs

I have questions. two

the today? on to you guess, of or your those overlap what fast Ventrac. distribution? first, fold disruptions? And plans of And of Could that any just then, you into kind would between kind about I current distribution business just how of, So the Toro businesses talk just types mitigate kind and of could any that about business guess, talk Toro I

Rick Olson

is, Right. Well, of a in Venture reasons overlap, the interested we Products they existing the and great on Incorporated our Ventrac all, are, first product specifically and lines. those the been one to so of extent, to why have categories complementary product --

that strength acreage landscape So into the tractor our multi-purpose feeds in our articulated into feeds or business, contractor owners. contractors

are and areas, the areas with in snow for lines. that of a products for so areas to slope appreciate the really seen mowing to product summer just for are forth. that that from We've Those our existing switching products also including host manicured all the versatility lot product. of capabilities, also turf And comes multi-purpose they courses, application complementary golf rough and and

channels, through to existing through turf terms And similar and and the dealers grounds commercial In our that overlap have channels then, for which competitive dealers. they the golf our of primary plans in the two some which is distribution things, are some of the have does side network, with dealer distributors today.

And into the strong a standpoint executing is, business expectation for be going the early making in plan of those forward. in those. to before But would all the we that turf about decisions partners and of of it's these the process picking from the now cases, the going We're we too execution have a best specific talk and dealer forward. we get

Tim Wojs

Okay.

is Okay. placement That's to the really maybe of aisle more just one placement, prior their lithium-ion Toro you residential battery kind emphasize customers outdoor helpful. about And terms that curious on in power -- there, maybe then, the your kind side and of versus technology. can of of is kind for if new how talk reset of I'm of guys? fits And you resetting

Rick Olson

have our electric, place We that's are lithium-ion extremely channel doing pleased specifically, excited about and with been with what we're to the very transition taking partners.

think, just was power the Mechanics I me, the something personally, listed magazine, deck walk top-rated up For and Toro I or opened Popular as product. of mower steel

far our been positive And there that is, I we and it's products that seeing very very talked at be product features think with and It's response performance about, not what alternative to on which the a novelty feel something compete and introduced positive. and we're to point. back coming we to benefits battery-powered a is, this really options. about so has ability And or we've power energy the

we a partners, So, with for can channel us, good that where product partnering go. feel and standpoint very our key about from

Tim Wojs

the of Good the Great. year. the on for time. Thanks rest luck

Rick Olson

you. Thank Yes.

Renee Peterson

Thanks, Tim.

Operator

Thank you.

Research. Our Bosshard question from comes next Eric Cleveland the with line of

is Your open. now line

Eric Bosshard

Two things.

customers now, last happened on just to I landscape where you channel them to you not like especially summarize now all, where months, was over inventories in contractor of the are you be? business. what but can clear think those XX I channel relative First where totally would the see understand inventory

Rick Olson

higher some plus finished field we internally extent year last the to Yes, year with level, a inventory inventory.

level work inventory we XXXX. for we've a of don't I things example, extraordinary through the through But -- So first out of range would to and expect for that the second don't that's it's specifically, I quarters. seen. the not at have, an number

Renee Peterson

QX Yes. But retail No. in quarter. is a strong

lot as it's that there's So not that within of a retail occurs though quarter.

we similar QX. where So ended to it's would fairly in have

Rick Olson

a And reason quarter extends that's so second much quarter but as shipments, the the about why snow. into the retail really lot it is about for first except not

Eric Bosshard

to understand it's customers demand and so. I or through does underlying that you've that the how obviously then feel XX year? harder The that quarter the read. shows a and demand with underlying landscape But days your last now contractor time to Related spent over

Rick Olson

have Midwest snow contractor been not always it. area been some has good of representatives And a the year landscape with couple feel standpoint. from if ready in been the the past to case there optimistic delayed and the they're the spoke just positive and years this more from they're get The spring. has that they season project of I in our a and we the tough about very in go. past revenue businesses normal about Particularly

Eric Bosshard

revenue business you define you you the Renee on expectations ahead have better-than-expected more were business specifically line? commented where there was Can performed quarter. think quarter, that narrowly that I expected lastly, interested in were then And the just than or areas the the better of total may in of the in

Renee Peterson

Yes on stores have mentioned to QX. in be -- discussions would rollout, being as and on some particular initial based we Rick we anticipated shipments came for based Supply, were And shipments the had originally mutual set those those QX. mentioned the of the had in to Tractor that into how

And residential part of our drove so of the growth the and for well. quarter some that also beat as

Eric Bosshard

you. Thank Okay.

Rick Olson

you. Thank

Operator

a do follow-up David you. MacGregor Thank of the We question from Longbow have Research. line with

now Your open. line is

David MacGregor

minutes of terms asked Yes, thanks just the just just us Home guess, market. I the guess you the visibility follow-up. was for -- in about Toro lot kind a alternative here would the in and presence the of of could here maybe the call taking help And just energy. the year-over-year And Depot that brand if understand last to question I of in the like -- of Rick earlier I progress reset. of couple

still differ you terms from residential? that And the might kind in the how innings thoughts versus rates you alternative -- How about bigger secular pro of of of category. energy? in And kind some think growth and early of growth opportunity that just

Rick Olson

Great.

to provided to power If that's for relatively it's of going mower, the products. example you the battery portion, It's still the smaller be at portion for those look long electric Engines the around of growing. are power a portion time. walk

products we they're being alternative to and in are be a now response obsolete ago products had us, of but energy see in anytime extremely it's autonomous. connected along going to prioritized the not the excited marketplace. And and So and introduced smart we to years fulfilling for the number with soon, see

there think good we is So grow. opportunity to

In many of displacing products. the cases, it's gas-powered

very and positive not has been the the all our us, very but far been strong. has response so for it's incremental to So experience products

is, would we leverage I Just have across to mention do businesses. the thing last our the ability

like mower things. -- faster like experience can that the leverage it's vice power be side walk moving areas we in other areas versa commercial into of and may the And some there area. residential So

excited continue. we're that the So about expect growth to and we

David MacGregor

Can sourced? you you say the manufactured how much offering by of versus current is

Rick Olson

battery? With to specifically regards

David MacGregor

Yes.

sourced much Just the Dingo out? about of entire structure as of power and product talk is The you across -- battery just Flex-Force. line that the you and and how entire It's alternative And energy, the manufactured offering. TriFlex versus think

Rick Olson

area, the manufactured With cases the exception in coming us. some by of us. from it's is residential Technology

David MacGregor

growth you don't how you And quantify, thinking don't want about growth a to opportunity? you're want Okay. the us give rate to

Rick Olson

be to quote that that to to have now right you. wouldn't able I

David MacGregor

Okay. much. very Thanks Terrific.

Rick Olson

you. Thank

Operator

This question-and-answer Rhoads, to closing session. concludes proceed remarks. please Mr. the

Nicholas Rhoads

discuss our for Thanks to and second to in Toro you. We Company. the with your look Thank June you quarter interest Great. questions forward in results. talking again

Operator

Thank you presentation. participating today's in the concludes This conference. for

disconnect. now day. Good may You

The Toro Company (TTC) 5 Mar 202020 Q1 Earnings call transcript